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Who Cares About Corporate Taxation? Asymmetric Tax Effects on Outbound FDI
Author(s) -
Overesch Michael,
Wamser Georg
Publication year - 2009
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2009.01174.x
Subject(s) - foreign direct investment , multinational corporation , subsidiary , corporate tax , economics , business , double taxation , international economics , internationalization , monetary economics , tax avoidance , international trade , public economics , macroeconomics , finance
This paper investigates whether different types of FDI are asymmetrically affected by corporate taxation. We classify investment projects according to several characteristics such as the general motivation for FDI, the type of business activity, or the degree of internationalisation of the multinational firm. Subsequently, we analyse how local taxes influence the number of German outbound investments in European countries. The analysis reveals significant asymmetries with regard to tax effects: vertically integrated investments are more sensitive to host‐country taxation than horizontal FDI; larger tax rate elasticities are estimated if business activities are considered highly mobile; and in accordance with profit‐shifting considerations, subsidiaries of more internationalised companies are less tax responsive to host‐country taxation.